Page last updated at 04:21 GMT, Monday, 17 November 2008

Osaka puts economic hope in new ideas

By Duncan Bartlett
BBC News, Osaka

Japan has become the latest country to fall into recession. New figures show that its total economy shrank by 0.1% in the third quarter of 2008, marking the second consecutive quarter of decline.

Osaka shrine
Prayers at a shrine give some hope for economic recovery

However, some companies have developed ingenious ways to try to get them through another downturn.

Japan's small businesses provide the foundations of its economy but they are feeling the strain of recession most acutely.

The small firms account for 99.7% of all business enterprises in Japan and 70% of employment.

But bankruptcies are rising, especially among firms which usually rely on bigger businesses for their orders.

In Osaka, Japan's second biggest city, some companies are looking to the heavens for help.

They have banded together to build their own satellite.

Common goal

Hideo Sugimoto
People say it's given them inspiration for the future
Hideo Sugimoto
Dainichi Electronics

The initiative gives them a chance to work as a team and to call upon the expertise of scientists from local universities. They plan to launch the satellite next year and use it to study the storms in the skies above Japan.

Hideo Sugimoto is one of the pioneers behind the project. His firm, Dainichi Electronics, employs 17 people and usually makes telecommunications machinery.

"It's not so much the process of manufacturing the satellite that's causing excitement," he explains. "It's more the sense that all the companies have a common goal. People say it's given them inspiration for the future."

High-tech focus

The companies involved in the satellite scheme are all from the eastern part of Osaka. Many have painful memories of what recession feels like.

Dainichi Electronics satellite
It is hoped to launch the satellite next year

Japan was in and out of recession for most of the 1990s and during that time the number of small businesses in east Osaka fell from 12,000 to 6,000.

Many survivors concentrated on high-tech products and services. Japan spends more on scientific research than any other country.

However, it can be hard to maintain spending levels on research and development when profits are falling.

Furthermore, banks are becoming cautious about lending to small companies, even though there has not been a credit crunch here on anything like the scale recently experienced in Europe or the United States.

Unemployment fears

Japanese Prime Minister Taro Aso recently promised tax relief for small businesses and help for them in finding loans as part of a $51 billion package to assist the economy.

Computer worker in Osaka
High-tech products have been a salvation for many small firms

Another auspicious sign is that unemployment remains low - it fell to 4% in September.

That could change, warn economists, and most people I spoke to on the streets of Osaka told me they feel very uncertain whether they will keep their jobs.

If companies can't cope with the slowdown, they may well lay off staff.

But many Japanese firms believe that now is the time to try out new bright ideas which they hope will see them through the dark times ahead.

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